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Abu Dhabi continues to experience negative growth across all property types due to weakness in the job market and reduced housing allowances, according to the Q3 Abu Dhabi Real Estate report by leading real estate consultancy Asteco.
Average apartment rental rates dropped by 3% over the quarter and by 10% over the last 12 months, with the highest declines recorded for mid-end properties and large units within prime and high-end projects.
In the high-end segment, the highest year-on-year (YoY) declines were recorded at Abu Dhabi Corniche (down 15%), while mid-end and low-end areas evidenced the largest declines, including Al Reef Downtown, Khalifa and MBZ City.
Sales prices for apartments declined 3% quarter-on-quarter (QoQ) and 10% YoY. The most significant YoY declines in sales price were recorded in Al Muneera and Reef Downtown, both down 12%, with the highest QoQ declines reported in City of Lights, down 8%, and Sun & Sky Towers, down 6%. Both Al Bandar and Saadiyat Beach Residence showed resilience, being unchanged for the quarter.
Approximately 2,750 apartments have been completed across the emirate since the beginning of 2017, compared with 1,350 for the 2016 calendar year. In addition to the 800 units delivered in Q3, a further 1,500 apartments are due to handover before the end of 2017.
“We are experiencing a weak labour market with reduced employment opportunities and a tightening of housing allowances. This, together with additional supply since 2016 has led to increased vacancy rates which we expect to continue into 2018. Landlords are discounting rents and offering flexible payment terms, (up to 12 cheques) to retain existing tenants and secure new leases,” said John Stevens, Managing Director, Asteco.
Villa rental rates decreased by 3% QoQ and by 6% YoY. Al Raha Gardens, Hydra Village and the larger units within Saadiyat Beach Villas recorded a more pronounced drop with rents softening by 7%, 4% and 5% respectively.
The highest YoY decline in villa sales was recorded in Hydra Village, at 9%, with QoQ results showing a decline of 3%, the same as Raha Gardens.
Only a small number of villas were delivered in 2016, however approximately 550 villas have been completed in 2017 and a further 250 villas are due for delivery before the end of Q4.
Stevens said: “Rising vacancy rates have been experienced in many villa communities as tenants opted to downsize to smaller or more affordable properties, whilst some even transitioned to apartment units to reduce their accommodation expenses.”
He added: “Despite a marginal decrease in sales prices for completed villas, demand for prime and high-end off-plan projects, particularly those located on Yas Island and Saadiyat Islands, remained strong.”
Similar trends echoed throughout the office market due to a subdued economy, despite a modest recovery in the oil price since the start of the year. Office accommodation is evidencing low occupancy rates with approximately 170,000 sq.m. of office space having been delivered over 2016 and 2017.
Stevens said: “Office rents were broadly unchanged over the quarter; however, evidence indicates declines of 5% to 10% on contract renewals within several Grade A and B office buildings. Landlords have actively sought to reconfigure accommodation into smaller units and offer rent free incentives to retain existing tenants and secure new tenants”.
For more details, please visit www.asteco.com
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